July 1, 2009｜Russia
Researcher, Institute for Russian & NIS Economic Studies, Japan Association for Trade with Russia & NIS
In collaboration, the Ministry of Economy, Trade and Industry and the Japan Association for Trade with Russia and the NIS sent a contingent of more than 70 persons, directly related to companies, to the Russian Far East from the end of May to the beginning of June. The author participated as an official.
The Russian Far East is in the midst of large-scale redevelopment, based on the program which the government adopted two years ago. Work has already started on a portion of the projects, and this allows a foreseeing of their realization.
Although the Russian economy has slumped with the impact of the global economic crisis, there has been no change to the national policy to redevelop the Russian Far East, looking toward the 2012 APEC summit in Vladivostok. There is also financial backing from the central government, and I think it correct to conclude that the work will go on progressing at a brisk pace.
The Russian government has been requesting Japan’s cooperation in the development of the Far East. This has also been repeatedly brought up at Japan–Russia summits. This time around, the significance is great of Japan, and the elite ranks of major firms to boot, telling the Russian side directly of their intention to actively cooperate.
Japanese firms are already taking part in some projects. If this becomes a full-blown participation, it will mean the raising to a new level of the relationship between Japan and the Russian Far East.
The unfortunate thing, however, is that Japan’s presence in the Russian Far East has decreased in the last few years. On the Russian side, although they welcomed our group, there were also some people who pointedly displayed their disgust with “What have they come for?” and “Have they come to collect information again?” Both Japan and Russia have stressed a positive approach, yet it is also a fact that concrete prospects haven’t opened up.
Economic relations between Japan and the Russian Far East, in similar fashion to Japan–Russia economic relations, have grown greatly in the last few years. The volume of trade grew from US$0.97 billion in 2002 to US$7.1 billion in 2008, a more than seven-fold increase over those six years. Japan is the biggest trading partner for the Russian Far East. In terms of investment Japan is in third place behind the Netherlands and Britain (2008). When one looks at the content thereof, however, trade is skewed toward secondhand cars, and investment toward oil and natural gas development off Sakhalin.
While all this was going on, the ones that have increased their presence in the Russian Far East are China and the ROK. For China, using the fact that it has land borders, the coming and going of both people and goods is brisk. The economic relations that were centered on trade are shifting to investment such as the acquisition of marine-product and timber firms. The ROK, from small and medium-sized to large enterprises, is also actively expanding. In Japan’s case, it is only doing a storm in secondhand cars, and its “face” has become totally invisible. It would be alright to say that its presence has disappeared.
The differing degrees of enthusiasm regarding economic cooperation can also be pointed out. The Russian side, while requesting Japan for cooperation, is also downbeat, thinking that “in any case it won’t come”. For the Japanese side too, even while calling it a business opportunity in an emerging market, regarding the market in the Russian Far East they are inactive. There are the fixed ideas on business in the Russian Far East of “it won’t turn a profit” and “without schemes such as government guarantees we can’t venture out”. A mismatch between Japan and the Russian Far East has arisen.
What can be done to resolve this? Although no silver bullet, first comes venturing out. Unfortunately, while economic relations continue to expand, the number of Japanese firms that have expanded into the Russian Far East has scarcely changed over the last few years. Japan is too inward-looking. It is necessary to change that. If it isn’t changed, no matter how much economic cooperation is mentioned, things will probably finish up as armchair plans and pie in the sky.
“People who are risk-averse”—a Vladivostok newspaper journalist put this phrase in the title of an article on Japan a few years ago. At the time I thought it was an appalling title to use, but hearing it now it is acceptable in part.